Facebook: How to Spend $19 Billion in 11 Days

Facebook Inc. CEO Mark Zuckerberg has always played by his own rules, but Wednesday night, he again offered the world a quick glimpse of his acquisition playbook.

On a conference call with investors and analysts, Mr. Zuckerberg briefly discussed how Facebook’s $19 billion acquisition of WhatsApp came together.

First of all, he moved quickly: 11 days in all.

“Last Sunday evening, so about 11 days ago, I proposed that if we joined together, that would help us really connect the rest of the world,” Mr. Zuckerberg said on the call.

Less than a week later, Mr. Zuckerberg said that he and WhatsApps CEO Jan Koum discussed price and “came to terms that were agreeable to us, and I think we just decided to go forward from there.”

For WhatsApp, Facebook will pay $4 billion in cash, $12 billion in stock, and $3 billion, or 46 million in restricted stock options that will vest over the next four years.

On the conference call, neither Mr. Zuckerberg nor Facebook’s chief financial officer David Ebersman offered any of the typical formulas used for valuing an acquisition, or what it will add to earnings or synergies.

Instead, they discussed WhatsApp’s current and future growth prospects, most notably the likelihood of reaching “one billion people in the next few years” through instant messaging.

How they got to $19 billion for those billion users? None of the executives offered an explanation.

The advisers to the deal – Allen & Co. for Facebook and Morgan Stanley for WhatsApp as well as the lawyers — could earn as much as $91 million for their work on the deal, according to Freeman & Co.

For Mr. Zuckerberg, this deal took significantly longer than Facebook’s $1 billion acquisition of the photo sharing site Instagram in April 2012.

Mr. Zuckerberg and Instagram’s CEO Kevin Systrom put together the $1 billion deal, at the time Facebook’s largest acquisition, in three days during several meetings at Mr. Zuckerberg’s Palo Alto house. “By the time Facebook’s board was brought in, the deal was all but done. The board, according to one person familiar with the matter, “was told, not consulted,” the WSJ reported.

Mr. Zuckerberg didn’t get into more specifics on when his board was consulted or when outside advisers were brought in on the WhatsApp deal, but throughout his 30-minute conference call Wednesday, Mr. Zuckerberg referred to the Instagram deal as a model for the WhatsApp deal.

He said Facebook plans to allow WhatsApp to operate independently. Instagram, he said, has operated this way. “What we found is that it really can work.”

With this deal, Mr. Zuckerberg is also effectively telling entrepreneurs that $1 billion is no longer cool. What’s cool: $19 billion.